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sec 44AB

Ansari (ca final) (444 Points)

04 December 2009

Status- Firm with 2 partners

Sale Rs. 20,25,000/- upto 30.09.08

One partner retire from 01.10.08

Remaining 1 partner continue the same firm

Sale Rs. 20,00,000/- from 01.10.08 to 31.03.09

Ques- Sec 44AB shall apply in case of the firm.

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2 Replies

kabirsen (student) (251 Points)
Replied 04 December 2009

this is the case of dissolution.

since there were two partners in a firm and 1 partner retired, the partnership firm gets converted to a proprietorship firm. so clearly the applicable section is section 189 which is related to dissolution of firm .

as per this section the assessment will be done as if the dissolution has not taken place(deeming fiction). therefore turnover to be clubbed. and tax audit is applicable.

to make it more clear. this situation is not covered by the section 188. section 188 deals with succession of one firm by another firm. section 188 says that there will be seperate assessment for succeeding and precedindg firms and thus no need to club turnover. ur case is not covered by section 188 as in ur case a partnership firm is succeeded by proprietorship concern. therefor section 189 will apply and a.o. will assess the income of the firm as if no dissolution has taken place and combine the turnover. thus a.o. wud be eligible to book you for penalty for contravention of 44ab us 271(1b).

this is a harsh interpretation .... but the literal interpretation says assessment without taking into a/c the fact of dissolution.

therefore 44ab applies as combined t/o exceeds 40l